ACCOUNTABILITY AND TRANSPARENCY IN STATE OWNED ENTERPRISES –

OPPORTUNITIES AND CHALLENGES FOR THE PUBLIC ACCOUNTS

COMMITTEES.

A TANZANIAN RESPONSE PRESENTED BY…..

HON. JOHN M. CHEYO, MPCHAIRPERSON PAC – TANZANIA

ATTHE 9TH SADCOPAC ANNUAL CONFERENCE AND AGM,

3RD-6TH SEPTEMBER 2012, MPUMALANGA, NELSPRUIT, SOUTH AFRICA

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1. INTRODUCTION

A State Owned Enterprise (SOE) can be considered

as an organization established by the government under

public law (e.g. National Housing Corporation and

Tanzania Petroleum Development Corporation) or private

law (e.g. TANESCO), as a legal personality which is

autonomous or semi- autonomous, produces/provides

goods or services on a full or partial self-financing basis,

and in which the government or a public body/agency

participates by way of having shares or representation

in its decision-making organs. 2

INTRODUCTION According to the Treasury Registrar (TR) Statement of

Government Investments there are 238 State Owned Enterprises in the country.

By June 30th, 2011 the Government of Tanzania had a

total equity of 10.3 trillion shillings in SOEs which is 30% of GDP at current prices in Shillings terms.

Tanzania Govt and the public have invested in Pension Funds [LAPF (218bn), PPF (722bn), NSSF (1029bn) and PSPF(732bn)] than in service providing corporations [NHC (1054bn), TANESCO (907bn) and TPA (414bn)] regardless of their importance.

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2. ACCOUNTABILITY AND TRANSPARENCY IN SOES

Under the notion of good governance, we recognize a number of generally acceptable principles, including:

Accountability, meaning that it is possible to identify and hold public officials to account for their actions.

Transparency, meaning that reliable, relevant and timely information about the activities of government is available to the public.

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ACCOUNTABILITY AND TRANSPARENCY IN SOES

All the SOEs are required by law to be audited and publish their audited financial statements to the general public.

Article 143 of the Constitution of United Republic of Tanzania requires the CAG to audit with no exception the finances of Government including the SOEs and report to Parliament at least once a year.

The Public Finance Act (2001) section 31 clearly states that the CAG will audit on behalf of Parliament. While section 37 of this Act mandates all Public Authorities (including SOEs) to be audited by the CAG and their audited financial statements to be made public.

The Public Audit Act (2008) mandates the CAG to audit and report on the accounts, financial statements and financial management of all government bodies including the SOEs.

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ACCOUNTABILITY AND TRANSPARENCY IN SOES

The Constitution of URT sets the ground for the Parliament to play a big role in facilitating accountability and transparency in SOEs. Article 63- Oversight Advisory Article 89- Formation of Parliamentary Standing Orders Article 96- Formation of Parliamentary Committees

Parliament works through 18 Committees:Cross cutting Committees e.g. Committee on HIV/AIDS. Sector Committees e.g. Committee on Social Services

(Health ,Education ), Committee on Finance and Economic Affairs.

Oversight Committees - Public Accounts Committee (PAC), Local Authorities Accounts Committee( LAAC) and Parastatal Organizations Accounts Committee(POAC)

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THE TYPICAL ACCOUNTABILITY LOOP OF THE PARASTATAL ORGANISATIONS ACCOUNTS

COMMITTEE

On 31st March- CAG REPORT on Audited Financial Statements of the Public Authorities is ready and sent to Parliament via the President who is obliged to present the report to Parliament by the first sitting of the house - normally in April every year.

CAG report tabled and becomes Public.

POAC Report on preceding CAG Report is tabled and discussed by the Parliament in April.

POAC Report and Recommendations are then adopted as resolutions of the Parliament.

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THE TYPICAL ACCOUNTABILITY LOOP OF THE PARASTATAL ORGANISATIONS ACCOUNTS

COMMITTEE

Accountability conference: POAC, PAC, LAAC, FEAC, CAG, Ministry of Finance and stakeholders internal & external.(immediately after parliament session in April/May.)

Throughout the financial year POAC travel for expenditure tracking on SOEs’ development projects.

June POAC participates in the Budget Process with a kin eye on the contribution of the SOEs in the Revenue collection and the performance of the budget allocated for the SOEs.

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THE TYPICAL ACCOUNTABILITY LOOP OF THE PARASTATAL ORGANISATIONS ACCOUNTS

COMMITTEE

October/ April - Parliamentary session; POAC conducts hearings of Accounting Officers (SOEs’ Board of Directors).

Preparation of the Report and tabling in Parliament for discussion.

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3. OPPORTUNITIES FOR PUBLIC ACCOUNTS COMMITTEES

The existing legal framework that helps to maintain accountability and transparency in the management of public finances by the SOEs - The Constitution of URT, the Finance Act (2001), the Public Audit Act (2008), the Public Procurement Act (2001), the Prevention and Combating of Corruption Act (2007) and the National Assembly Administration Act (2008).

The existing legal framework empowers the Oversight Committees to: Summon the Accounting Officers and the Board of

Directors of the SOEs. Give sanctions to the defaulting Accounting Officers or

the Board of Directors of the SOEs Request for any information or documentation which can be used as evidence in the Committee’s sessions

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OPPORTUNITIES FOR PUBLIC ACCOUNTS COMMITTEES

The formation of an Oversight Committee (POAC) in 2008, the Committee entirely dedicated to oversee the performance of the Parastatal Organisations (SOEs) in management of public finances.

Structured response by Government to Public Accounts Committees’ and the CAG’s reports and recommendations.

A wide Media coverage of Oversight Committees’ sessions. However, Committees’ recommendations are public only when tabled and deliberated in Parliament.

Increased attention of Oversight Committees’ and CAG’s reports by the President (high profile presentation of CAG report).

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OPPORTUNITIES FOR PUBLIC ACCOUNTS COMMITTEES

Increased sharing of information between Oversight Committees (POAC) and development partners leading to reduced parallel accountability and enhanced domestic Accountability through Parliament.

The use of IFRS by the SOEs provides more room for transparency in the management of public finances.

The establishment of the Office of the Registrar of Treasury and the publication of the Statement of Government Investments provide more opportunity for accountability and transparency in the performance of SOEs.

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4. CHALLENGES FOR PUBLIC ACCOUNTS COMMITTEES

o The appointing authority of the Chairpersons of the Boards of Directors (BODs) and the CEOs of the SOEs is the President which creates a battle for power supremacy and impairs the principles of accountability.

o Hence, to resolve this CEOs should be appointed by the BODs, the President to appoint the Chairpersons of BODs and Parent Ministries to appoint the other members of DOBs.

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CHALLENGES FOR PUBLIC ACCOUNTS COMMITTEES

o Weak Internal Audit function.

o The current number of qualified Internal Auditors both in Central, Local Authorities and Public enterprises is not sufficient.

o There continues to be weaknesses in procurement processes, which are regularly reported in the reports of the CAG.

o Non-responsiveness to CAG’s queries by some Accounting Officers or CEOs of the SOEs which is partly due to lack of appropriate legal instruments for enforcement.

o Little or no action taken on officers suspected of embezzlement of Public Funds by the Executive.

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CHALLENGES FOR PUBLIC ACCOUNTS COMMITTEES

o Another critical challenge on the aspect of accountability in overseeing the performance of SOEs can be traced as the absence of the Budget Office and the implementation Committee in the normal framework of the Parliament.

o Despite that the Treasury Registrar has the legal mandate to manage public organisations, the government is in the process of amending the Treasury Registrar law to provide the treasury’s with powers to monitor the performance of public enterprises and agencies more effectively.

o The office of Treasury Registrar shall be independent with full authority to ensure accountability and better performance of public organizations including SOEs. 15

5. THE WAY FORWARD

o Enhancement of a political will in facilitating accountability and transparency in SOEs.

o The offices of the CAG, the Internal Auditor General and the Treasury Registrar should be given greater independence, in order to enhance performance in their accountability functions especially in monitoring the performance of SOEs.

o The Parliamentary Oversight Committees (POAC, PAC & LAAC) should be empowered financially and capacity wise so that they can effectively carry their oversight functions.

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THE WAY FORWARD

Strengthening the role of the Parliamentary Oversight Committees, particularly through the provision of legal powers to enforce follow-up actions in response to recommendations and through strengthening technical and administrative levels to remove the factors that constrain effective engagement of Parliamentary Oversight Committees in monitoring the performancy of SOEs.

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THANK YOU AHSANTE SANA

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REFERENCES

OECD, Public sector transparency and accountability:

Making it happen, OECD, Paris, 2002, pp. 3, 7, and 10.

The Constitution of the United Republic of Tanzania of 1977

(Cap. 2) with amendments of 2005.

The Public Finance Act of 2001 and its regulations.

The Public Audit Act of 2008 and its regulations.

The Public Procurement Act of 2001 and its regulations.

The Prevention and Combating of Corruption Act of 2007

and its regulations.

The 2011/2012 Report of the Parliamentary Parastatal

Organisations Accounts Committee (POAC)

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